The FTSE 100 and the British pound fell on Monday, with markets reacting to the increasing costs of UK government borrowing revealed last week. Investors are also weighing the possibility of future interest rate cuts.
The pound dropped toward $1.21, marking its lowest level since November 2023, while the yield on UK 10-year government bonds (gilts) remained around 4.88%. According to Bloomberg, options traders are preparing for a further 8% decline in the pound’s value, with a notable increase in demand for contracts betting on a drop below $1.20.
London’s FTSE 100 index ended the day down by 0.2%, with mining giant Fresnillo (FRES.L) and British Airways parent company International Consolidated Airlines Group (IAG.L) both falling by over 3%.
European Markets Also Struggle
In Europe, major stock indices experienced losses. Germany’s DAX dropped 0.3%, while the CAC 40 in Paris also fell by 0.3%. The pan-European STOXX 600 index closed down 0.5%.
US Markets See Mixed Performance
Across the Atlantic, US stock indexes were mixed. Tech stocks led the decline, with the S&P 500 dropping 0.6% and the Nasdaq Composite sinking by around 1.4%. Meanwhile, the Dow Jones Industrial Average, which includes fewer tech stocks, rose slightly by 0.3%, ahead of key bank earnings expected later in the week.
Markets React to Economic Data
The previous Friday’s market plunge wiped out all year-to-date gains for major US stock indexes. A strong jobs report for December raised concerns that the economy’s resilience could lead the Federal Reserve to maintain higher interest rates for a longer period, further unsettling investors.
Related topics:
